350,000 COULD LOSE THEIR JOBS

An economic meltdown on the way: ESRI

AT LEAST 350,000 people could lose their jobs as the coronavirus outbreak puts the booming economy into a shock reverse, it is predicted.

The job-loss prediction – which is not the worst-case scenario – would see the economy shrink by more than 7% this year and send unemployment soaring beyond levels seen after the 2008 financial crash.

And the jobless rate will more than treble from 4.8% to 18%, says the government-funded Economic and Social Research Institute

A total of 120,100 people were registered unemployed last month, but the ESRI figure would push it up to more than 470,000, almost a four-fold increase. The worst unemployment rate during the crash was 16% in February 2012.

The ESRI described the Covid-19 pandemic as ‘the greatest threat that the Irish economy has faced since the financial crisis’. It said: ‘At present, the primary policy objective is the implementation of the necessary public health measures in whatever form is required, including closure and restrictions on economic and social life.

‘Given the uncertainty around the current virus outbreak, it is not possible to undertake traditional economic forecasts.’

ESRI research professor Kieran McQuinn described the job-loss forecast as a ‘conservative’ estimate, and warned: ‘If anything, you could argue we could have a more substantial number of job losses; it’s very difficult to call.’

He fears the economic shock will make employers cautious to rehire staff but thinks the unemployment rate could return to 10.5% by the end of the year, barring any repeat outbreaks of the virus.

Prof. McQuinn said: ‘We could see the economy perform well next year and rebound strongly and you could start getting back towards 6%, 7% unemployment next year and maybe another year again before you get back to where we’re at right now. It’s a good rebound but it’s all predicated on the medical issue being contained. It’s disappointing as we were just starting to come out of the financial crisis. You were looking at National Development Plans pledging billions of euro to address infrastructural deficits and now you’re back pinching and scraping.

‘You also have a big spike in precautionary behaviour; people are not going to be rushing out spending. Even if this is cleared up quite quickly, it’s going to have long-lasting effects on behaviour – it will have a scarring effect.’

The ESRI’s latest quarterly economic commentary predicts consumption, investment and net trade would all fall sharply, households would cut spending, firms would cancel or postpone investment and external demand for Irish goods and services will fall.

‘The labour market, which had been in a position of strength before the spread of the pandemic, is to face the largest one-quarter shock in living memory. Under the scenario, the unemployment rate increases to 18% in Q2 up from 4.8% in the previous quarter,’ the commentary said.

‘It must be noted that this current scenario may turn out to be too benign. As events are unfolding rapidly, we will revisit these scenarios more frequently than our traditional release pattern.’

‘It will have a scarring effect’